18 Jul 2018, 12:09 — 4 min read
Budget 2018 has made no changes in Income Tax Slab Rates for the financial year 2018-19 (Assessment Year 2019-20). However, it introduced some significant tax changes. These tax changes will have an impact on how much taxes you will pay. Therefore, as a taxpayer, you should be aware of these tax changes which were introduced in the Budget 2018.
In this artiicle, let us take a look at 7 important income tax changes that have come into effect.
1. Reintroduction of Standard Deduction
The Budget 2018 proposed to reintroduce a standard deduction of a maximum of INR 40,000 from salary income. However, this standard deduction will replace the current exemption in respect of transport allowance and reimbursement of medical expenses. Apart from salaried employees, the pensioners will also be allowed to avail the benefit of this standard deduction. There is no requirement to submit any documents/ proofs/bills to avail this tax benefit. This change is a relief to the salaried class.
2. Reintroduction of LTCG Tax
The Budget 2018 has reintroduced long-term capital gains (LTCG) tax on equity shares and units of equity oriented mutual funds. The gains from the sale of equity shares and units of equity oriented mutual funds will be taxed at 10% from April 1, 2018, if the amount of gains is exceeding INR. 1,00,000. Earlier, long-term capital gains (LTCG)were exempted from tax. However, the profits earned up to January 31, 2018, are being grandfathered.
3. Cess increased to 4 percent
The Budget 2018 has made no changes in Income Tax Slabs and Rates for individuals and HUFs (Hindu Undivided Families) for the financial year 2018-19. However, the government has increased cess contribution to 4 percent from earlier 3 percent. This cess will be called “Health and Education Cess”. Cess is calculated on the amount of income tax payable.
4. 10% Dividend Distribution Tax in Equity Mutual Funds
A 10% Dividend Distribution Tax (DDT) will be imposed on dividend income of equity mutual funds in the financial year 2018-19. However, the dividend distribution tax will be deducted by the mutual fund houses on dividends before distribution.
5. Tax Exemption on NPS withdrawal
The tax-exemption benefit on NPS withdrawal is also extended to non-employee subscribers in the budget 2018. This means that a non-employee subscriber is also allowed an exemption in respect of 40% of the total amount payable on the closure of NPS account or opting out of it. This tax-exemption benefit will bring non-employed subscribers at par with the employee class.
6. Tax Exemption on Interest earned by Senior Citizens
The tax exemption limit on interest income by senior citizens from Rs. 10,000 to Rs. 50,000. Interest income will include interest earned from deposits accounts (Fixed Deposits and Recurring Deposits) held with the post office, banks, and co-operative society by senior citizens.
7. Increased Deduction for Health Insurance and Medical Expenditure for Senior Citizens
The deduction limit for the medical insurance premium is increased for senior citizens from INR 30,000 to INR 50,000 per annum under Section 80D. Similarly, the limit of deduction for medical expenditure (critical illness) for senior citizens is also increased to INR 1 lakh under Section 80DDB.
To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
Recommended articles for you
By Varun Bhagat
By Amy Radin